European Stocks Rally as Trump Postpones 50% EU Tariffs, Easing Trade War Fears

May 26, 2025, Frankfurt — European stock markets opened higher on Monday, buoyed by U.S. President Donald Trump’s decision to delay 50% tariffs on European Union goods until July 9, averting an immediate escalation of trade tensions. The pan-European Stoxx 600 climbed 1% shortly after the opening bell, with Germany’s DAX surging 1.8% and France’s CAC 40 gaining 1.3%. The rebound follows a sharp sell-off late last week after Trump’s initial tariff threat, which had rattled investors.

The delay, announced after a call with EU Commission President Ursula von der Leyen, has sparked cautious optimism, though markets remain wary of ongoing trade uncertainties and broader economic challenges.

Markets Rebound After Tariff Delay

Trump’s Friday announcement of 50% tariffs on EU goods, set to begin June 1, sent shockwaves through European markets, with the Stoxx 600 dropping 1.5% and auto stocks plummeting 3%. His Sunday reversal, following discussions with von der Leyen, restored confidence, with all sectors trading in positive territory on Monday. German automakers, highly exposed to U.S. trade policies, led the gains: BMW rose 1.4%, Mercedes-Benz advanced 1.5%, and Volkswagen jumped 1.5%.

Real-time data shows the DAX approaching a two-week high, driven by relief over the tariff postponement. Von der Leyen’s commitment to “advance talks swiftly and decisively” has fueled hopes for a negotiated resolution, though analysts warn that unresolved trade issues could resurface.

Did You Know?
The EU is the U.S.’s second-largest trading partner, with bilateral trade in goods reaching $1.2 trillion in 2024, according to Eurostat, making tariff disputes a high-stakes issue for both economies.

Autos Sector Bounces Back Amid Trade Sensitivity

The European auto sector, a cornerstone of the EU’s $250 billion export market to the U.S., rebounded strongly after Friday’s losses. Vehicles and machinery, accounting for nearly 30% of EU exports to the U.S., are particularly vulnerable to tariffs, making the sector a bellwether for trade sentiment.

Real-time market updates indicate that auto stocks have regained nearly half of last week’s losses, with investor sentiment bolstered by the prospect of renewed U.S.-EU talks. However, social media discussions highlight lingering concerns about potential U.S. protectionist policies, especially after Trump’s separate threat of 25% tariffs on Apple unless it shifts iPhone production stateside.

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Global Context and Market Outlook

While European markets rallied, Asian markets showed mixed performance overnight, with Japanese and South Korean indices climbing, while Chinese and Hong Kong stocks dipped amid regional economic concerns. U.S. markets, closed for Memorial Day, ended Friday lower following Trump’s initial tariff threat. Looking ahead, investors are monitoring upcoming U.S. economic data, including consumer confidence and durable goods orders, which could influence Federal Reserve policy and global market dynamics.

Europe’s economic outlook remains clouded by energy price volatility and inflation pressures, with recent supply cuts at Norway’s Troll gas field adding to cost concerns. The tariff delay offers temporary relief, but the path to a lasting U.S.-EU trade agreement remains uncertain.